1099-MISC FILING INFORMATION
As an employee, you receive a W-2 each year detailing how much you made and how much you had withheld from your paycheck for taxes.
Instead of a W-2, as an independent contractor, you’ll receive a 1099-MISC. This form details how much you were paid throughout the year. You can use that information to double-check that you’re reporting all of your income earned through the year.
If you earned less than $600 from a client during the year, you won’t receive a 1099-MISC, but you will still need to report that income on your Schedule C. That’s why keeping a good accounting system is so important.
INDEPENDENT CONTRACTOR TAX DEADLINES
As an independent contractor, be prepared for additional tax deadlines. Now, in addition to your personal income tax deadline of April 15, you’ll also have both federal and state quarterly tax deadlines.
Your estimated tax payments are due four times per year. You can use Schedule SE to help you calculate how much you owe at each deadline.
The deadlines for making your quarterly estimated tax payments are:
- April 15: for income earned from January through March.
- June 15: for income earned in April and May.
- Sept. 15: for income earned from June through August.
- Jan. 15: for income earned from September through December in the prior year.
Don’t forget that if your state has income taxes, you’ll also need to make estimated tax payments to your state. Check with your state’s business resources for deadlines and any required forms.
Your personal income tax deadline as an independent contractor is the same as it is for employees. All personal income tax, filed with Form 1040, is due April 15 of each year. If April 15 falls on a weekend or a holiday, they are due the next business day.
With your Form 1040, you’ll file your Schedule C, Profit and Loss from Business and your Schedule SE, Self Employment Tax.
If you can’t file your taxes by the April 15 deadline, you should use Form 4868 to file for an automatic six-month extension. But that’s only an extension to file your paperwork — if you owe any taxes, you’ll need to pay them by the April 15 deadline to avoid being charged a penalty.
If your state has income tax, you’ll also be required to file and pay your state income taxes. Check with your state to understand when and how to pay state taxes on your income as an independent contractor.
So, how does calculating your own independent contractor taxes work?
Let’s say during the year you earn $40,000 as an independent contractor from working with two companies. These are your only jobs and you’re not an employee anywhere else. You should receive a 1099-MISC from each company confirming how much they paid you during the year. You’ll include this income on Part 1 of your Schedule C.
You also have some expenses that you can deduct from your income. You work from a qualified home office, which is 200 square feet — and using the simplified method, you can deduct $5 per square foot. Your home office deduction is $1,000.
You also drove 600 miles during the year for some required assignments, so you can take a deduction of $348 (using the IRS deduction of $0.58 per mile). In total, you have $1,348 in deductions so the total net profit as an independent contractor that you report on Schedule C is $38,652. That income amount will be included on Form 1040 as your taxable income.
Once you know how much you earned, you’ll need to figure out how much you must pay in self-employment taxes. Using Schedule SE, you calculate that you owe self-employment taxes of $5,914. Half of this tax that you pay ($2,957) is taken as a deduction on Page 1 of your Form 1040.
Now that you’ve completed your Schedule C and Schedule SE, you have the income and deduction information you need to finish filing your 1040 personal tax return.
If your state has income tax, you’ll also be required to file and pay your state income taxes. Check with your state to understand when and how to pay state taxes on your income as an independent contractor.